An economic rebound, rising wages and declining unemployment claims weren’t enough to spare Federal Reserve Chairman Jerome Powell on Thursday from gripes in the Senate.
During testimony before the Senate Banking Committee, Democrats grilled Powell over the central bank’s support for climate change initiatives and its rollback of financial protections, while Republicans questioned Powell on his commitment to controlling inflation.
“Big banks rake in cash – and they spend it on executive compensation and dividends and buybacks, instead of lending in communities or increasing capital to reduce risk,” said committee chairman Sen. Sherrod Brown, D-Ohio. “The Fed should be fighting this trend, protecting our progress from Wall Street greed and recklessness – not making it worse.”
Ranking Member Sen. Pat Toomey, R-Pa., offered criticism for what he views as the Fed’s inaction on inflation.
“The Fed’s policy is especially troubling because the warning siren for problematic inflation is getting louder. Inflation is here, and it’s more severe than most — including the Fed itself — expected,” he said. “Since the Fed has proven unable to forecast the level of inflation, why should we be confident that the Fed can forecast the duration of inflation?”
The barbs from both sides of the aisle may feel unfamiliar to Powell, who has otherwise received praise from lawmakers for acting quickly to flush the U.S. economy with cash as the Covid-19 pandemic forced thousands of businesses to close.
The recent criticism of the Fed and its leader may have less to do with economics and more to do with political posturing. With members of both parties seeking an early edge in the key 2022 midterm elections, Powell may find himself with fewer public allies in Congress.
Federal Reserve Chairman Jerome Powell adjusts his tie as he arrives to testify before a Senate Banking, Housing and Urban Affairs Committee hearing on “The Semiannual Monetary Policy Report to the Congress” on Capitol Hill in Washington, July 15, 2021.
Kevin Lamarque | Reuters
House Financial Services Committee Ranking Member Patrick McHenry, R-N.C., proved a notable exception on Wednesday, when he supported Powell’s candidacy for a second term.
“You have earned and deserved another term as chair of the Federal Reserve,” he told Powell. “You have proven to be a steady hand throughout this pandemic or ongoing recovery.”
Progressive Democrats may hope to open an avenue for President Joe Biden to nominate a Democrat to lead the central bank.
Brown and other members of his caucus have pushed Powell to compel lenders to address climate change, reduce income inequality between executives and their employees, and bulk up capital requirements for the nation’s largest banks.
Some, such as Massachusetts progressive Democrat Sen. Elizabeth Warren, argue that the Fed should be led by a chair who proactively seeks to strengthen Wall Street oversight. Those hoping for a Democratic central bank chair have said that Fed Governor Lael Brainard is an excellent option for Biden.
“What I’m looking for is that the Fed’s record over the past four years is one move after another to weaken regulation over Wall Street banks,”…